Feasibility Study; Technical, Market, Financial, Economic

A feasibility study is an analysis used in measuring the ability and likelihood to    complete a project successfully including all relevant factors. It must account for factors that affect it such as economic, technological, legal and scheduling factors. Project managers use feasibility studies to determine potential positive and negative outcomes of a project before investing a considerable amount of time and money into it.

For example, a small school looking to expand its campus might perform a feasibility study to determine if it should follow through, considering material and labor costs, how disruptive the project would be to the students, the public opinion of the expansion, and laws that might affect the expansion.

A feasibility study tests the viability of an idea, a project or even a new business. The goal of a feasibility study is to emphasize potential problems that could occur if one pursues a project and determine if, after considering all significant factors, the project is a good idea. Feasibility studies also allow a business to address where and how it will operate, potential obstacles, competition and the funding needed to get the business up and running.

Importance of Feasibility Studies

Feasibility studies allow companies to determine and organize all the details to make a business work. A feasibility study helps identify logistical problems, and nearly all business-related problems and their solutions. Feasibility studies can also lead to the development of marketing strategies that convince investors or a bank that investing in the business is a wise choice.

Components of a Feasibility Study

There are several components of a feasibility study:

• Description: A layout of the business, the products and services it will offer, and how it will deliver them.
• Market feasibility: Description of the industry, the current and future market potential, competition, sales estimations and prospective buyers.
• Technical feasibility: The details on how a company will deliver goods or services, including transportation, business location, technology needed, materials and labor.
• Financial feasibility: A projection of the amount of funding or startup capital needed, what sources of capital a business can and will use, and what is the return on investment.
• Organizational feasibility: A definition of the corporate and legal structure of the business. This may include information about the founders, their professional background and the skills they possess necessary to get the company off the ground and keep it operational.

Technical Feasibility

Technical feasibility examines whether the project is possible from a technological perspective. It evaluates the resources, skills, and technology required to implement the project successfully. The following are some factors that are considered in technical feasibility:

• Technical requirements: Technical feasibility examines the project’s technical requirements, including software, hardware, and infrastructure. For example, if a project requires a website, the technical feasibility study would examine the website’s design, coding, hosting, and maintenance.
• Resources: Technical feasibility also examines the resources required to implement the project successfully. This includes the availability of skilled personnel, raw materials, and equipment.
• Technology: Technical feasibility also evaluates the technology required to implement the project successfully. This includes assessing the existing technology and determining whether new technology needs to be developed or acquired.

Example:

A company wants to develop a mobile application for its customers. The technical feasibility study would evaluate the resources required, including the availability of skilled programmers and designers, the hardware and software required, and the technological capabilities of the company’s infrastructure.

Market Feasibility

Market feasibility evaluates the potential demand for the project’s products or services. It examines the target market, competition, and marketing strategies. The following are some factors that are considered in market feasibility:

• Target market: Market feasibility examines the target market, including the size, demographics, and buying habits. This helps to determine whether there is a potential market for the project’s products or services.
• Competition: Market feasibility also evaluates the competition in the target market. This includes examining the strengths and weaknesses of existing competitors and determining how the project can differentiate itself from the competition.
• Marketing strategies: Market feasibility also examines the marketing strategies that will be used to promote the project’s products or services. This includes determining the best channels for marketing, such as social media or email marketing, and developing a marketing budget.

Example:

A company wants to develop a new line of organic skincare products. The market feasibility study would evaluate the target market for organic skincare products, including the size, demographics, and buying habits. It would also examine the competition in the organic skincare market and determine how the company can differentiate its products. Finally, it would develop marketing strategies to promote the new line of skincare products.

Financial Feasibility

Financial feasibility examines the financial viability of the project. It evaluates the project’s profitability, cash flow, and return on investment (ROI). The following are some factors that are considered in financial feasibility:

• Cost: Financial feasibility examines the cost of implementing the project, including the capital costs, operating costs, and maintenance costs.
• Revenue: Financial feasibility also evaluates the potential revenue generated by the project. This includes examining the pricing strategy, sales forecasts, and market demand.
• ROI: Financial feasibility also evaluates the project’s ROI. This includes examining the payback period, net present value, and internal rate of return.

Example:

A company wants to open a new branch in a different city. The financial feasibility study would evaluate the cost of opening the new branch, including the capital costs, operating costs, and maintenance costs. It would also evaluate the potential revenue generated by the new branch, including the pricing strategy, sales forecasts, and market demand. Finally, it would examine the project’s ROI to determine whether it is financially feasible.

Economic Feasibility

Economic feasibility evaluates the economic impact of the project. It examines the project’s contribution to the local economy, job creation, and potential environmental impact. The following are some factors that are considered in economic feasibility:

• Contribution to the local economy: Economic feasibility examines the project’s contribution to the local economy. This includes examining the potential tax revenue generated by the project, its impact on local businesses, and its potential to attract investment to the area.
• Job creation: Economic feasibility also evaluates the project’s potential to create jobs. This includes examining the number and types of jobs that will be created and the impact on the local labor market.
• Environmental impact: Economic feasibility also evaluates the project’s potential environmental impact. This includes examining the potential for pollution, waste disposal, and energy consumption.

Example:

A company wants to build a new factory in a rural area. The economic feasibility study would evaluate the project’s contribution to the local economy, including the potential tax revenue generated, its impact on local businesses, and its potential to attract investment to the area. It would also evaluate the potential job creation and the impact on the local labor market. Finally, it would examine the project’s potential environmental impact, including pollution, waste disposal, and energy consumption.